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A Kind of Neither Keynesian nor Neoclassical Model (1): The Fundamental Equation

DOI: 10.4236/oalib.1103207, PP. 1-16

Subject Areas: Economics

Keywords: Cobb-Douglas Production Function, Output, Interest Rate, Investment

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Abstract

This paper is different from the existing macroeconomic theory. It derives the relationship between the various macroeconomic variables from the Cobb-Douglas function, and uses statistical data in United States to verify these equations. We find that the Cobb-Douglas function is obtained in the case that the marginal output is not 0, therefore it is a function with dynamic properties. On this basis, we use the difference between the compound output and simple output to determine the incremental output of a period, and its relationship with capital, interest rate, investment and other variables. These relations not only deny the premise of Keynesian theory, but also because the proof of the investment is not equal to the incremental capital, leaving the investment, output growth, business cycle and other neoclassical theory crisis.

Cite this paper

Zhan, M. and Zhan, Z. (2016). A Kind of Neither Keynesian nor Neoclassical Model (1): The Fundamental Equation. Open Access Library Journal, 3, e3207. doi: http://dx.doi.org/10.4236/oalib.1103207.

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